RURAL BUSINESSES

Rural businesses are those firms that are established and operate in rural
settings, far from the metropolitan areas that have traditionally been the
site of most non-agricultural business enterprises. Most businesses
continue to conduct business in large cities or thriving suburbs, but
analysts contend that technological advances, demographic changes, and
increased attention to "quality of life" considerations have
all combined to spur meaningful business growth in many rural areas as
well. As of 1998, according to Terry Neese in
LI Business News,
about 20 percent of small businesses (defined as those having fewer than
500 employees) were located in rural areas.

Increased receptiveness to new businesses has also had an impact on the
growth of commerce in some rural regions. As Brian Steinberg observed in
Entrepreneur,
"many small towns in states such as Iowa and Indiana are crying
out for new businesses. Dependent for generations on sagging agricultural
or manufacturing economies, these towns need entrepreneurs and the jobs
they supply to stay economically viable."

CHARACTERISTICS OF RURAL BUSINESSES

In an article for the
OECD Observer,
Chantal Illouz-Winicki and Dennis Paillard discussed three special
features of business creation in rural areas around the world that are not
present in urban areas. For example, the majority of growth in rural
economies comes from existing business enterprises rather than new ones,
particularly in the industrial sector. This is by no means an indication
that new businesses—industrial or otherwise—cannot survive
in rural settings. It merely means that existing businesses are
particularly well-equipped to continue once they have established
themselves. Reasons for this include the higher percentage of family-owned
businesses in smaller towns (which helps with issues of long-term
continuity), less competition in local markets, and what Illouz-Winicki
and Paillard described as "more determination when firms run into
difficulties, through a genuine or perceived lack of alternatives."

Experts have also noted that businesses in rural areas tend to be
characterized by their activities. Companies that specialize in providing
personal services (propane delivery, rubbish removal, etc.) are
commonplace, since there is a large and steady demand for these services,
which in more metropolitan areas would be handled by companies armed with
city contracts. Manufacturing establishments, on the other hand, are more
scarce because of transportation and work force issues. "In
isolated areas, business creation is usually aimed at local consumer
markets (retailing, community services) or new market niches (products
with a strong regional identity)," said Illouz-Winicki and
Paillard. "In more accessible areas it is aimed more at services or
intermediate goods (sub-contracting). It is notable that business
services, from office maintenance to consulting, are still
under-represented in rural areas because local markets are so
small."

FACTORS IN RURAL BUSINESS GROWTH

The growing appetite for a simpler, more relaxed way of life has long been
touted as a primary reason for the increase in rural businesses in recent
years. Certainly, this has been a factor, but several other considerations
warrant mention as well, including general economic conditions,
demographic changes, and new modes of communication such as the Internet.
Of course, not all rural regions experience business growth at the same
rate; indeed, some rural areas continue to flounder even as others blossom
with new business opportunities. "It is not easy to explain why an
area is dynamic, or backward," admitted Illouz-Winicki and
Paillard. "Complex forces are at work: specific local factors,
structures and aspects that are hard to assess precisely, such as cultural
traditions, business networks, and an attractive natural setting."

DEMOGRAPHIC CHANGES
Business experts believe that demographic changes will likely continue to
encourage growth in rural businesses over the next few decades. As more
and more "baby boomers" enter into retirement age with
disposable income, analysts point to rural businesses as some of that
trend's chief
beneficiaries. Moreover, this trend transcends national boundaries, for
it can be seen not only in the United States, but in Canada, Europe, and
other regions of the world. "Catering for senior citizens is a
potential source of activity whose scale has to be assessed without
delay," said Illouz-Winicki and Paillard. "This social
group, more mobile than earlier generations, often with more disposable
income than the rest of the population, is of growing demographic and
economic importance. Rural areas are already benefiting from this trend in
tourism, in high season and at other periods; and senior citizens are also
becoming new residents, either temporary or permanent."

TRAVEL AND TOURISM
The tremendous growth in the travel industry has been a significant
source of income for many small towns in rural settings. Indeed,
economists cite the travel and tourism industry as an engine of terrific
economic growth in many rural areas that are blessed with notable natural
or cultural surroundings. Many small towns located near national parks,
sites of historical interest, and scenic areas have seen a surge in
businesses aimed at nabbing tourist dollars, and many rural regions have
ridden the growth in travel and tourism to new levels of economic
prosperity. Of course, this is not a meaningful factor for many rural
areas that are not situated in the vicinity of a national park or other
popular tourist destination. Still, many rural city planners have
successfully spurred new levels of economic activity by marketing
attractive elements of the region (lakes and rivers, festivals, historical
sites, etc.) so as to draw tourists.

THE INTERNET AND OTHER TELECOMMUNICATIONS ADVANCES
The amazing capacities of the Internet and other relatively new means of
telecommunications have enabled business owners in even the most remote
locations to dramatically expand their potential customer base.
"Small remote communities are attempting to bridge their isolation
by taking their businesses and even their local governments
online," wrote David Goodman in
Inc.
" 'Community networking,' as the phenomenon is
known, brings the Internet to people in far-flung outposts. Rural
businesses have seized the opportunity to play in the big leagues, with
entrepreneurs of every stripe now hawking their wares in
cyberspace." Goodman cited the following as key steps for any rural
business community hoping to establish an online presence:

Organize—This step could take the form of organizing Internet
training for local business owners and managers.

Outreach—Talk to people and community organizations face-to-face
to explain how the Internet can help their business.

Educate—According to Goodman, providing classes on Internet use
to both employees and the larger community can help rural businesses
"develop a critical mass of technoliterate citizens."

Target—Provide workshops and training seminars specifically
tailored to individual business sectors so that their membership can see
how an Internet presence can benefit them.

Provide Access—Small towns should follow the lead of their larger
brethren, which often provide the public with free access to the
Internet at local libraries or community centers.

Finally, the rise of telecommuting and other communication advances has
made it increasingly possible for software developers, freelance writers,
graphic artists, and others who maintain home-based businesses to
establish themselves wherever they wish, provided they have reliable
computer and/or postal resources at their disposal.

COMMON OBSTACLES TO BUSINESS GROWTH IN RURAL AREAS

A significant percentage of new businesses in rural areas are established
businesses that relocate. Indeed, many entrepreneurs have established
their business ventures in rural regions of the country in recent years.
This trend has been especially evident among small business owners who
have decided to relocate for "quality of life" reasons.
These entrepreneurs are sometimes limited in their relocation options by
customer demographics and other factors, but the desire for quieter, less
hectic lifestyles has proven to be a potent one, as families search for
homes that are not bedeviled by traffic, crime, and other attributes often
associated with large cities.

Nonetheless, small business owners are urged to weigh the obstacles that
often confront businesses that decide to relocate in rural locations.
These hurdles range from different cultural standards and finding new
friends to negotiating new ways of transporting goods or finding quality
employees. In addition, services in rural areas often do not match those
that can be routinely relied upon in more metropolitan areas. Unreliable
electrical service, skimpy or nonexistent overnight delivery options, and
increased telecommunications costs (for regular telephone service as well
as Internet connections) can all complicate the efforts of businesses in
rural locations. These difficulties can be particularly problematic for
businesses that are involved in high-tech areas. "For
technology-dependent businesses to thrive in remote areas, connecting a
computer to the Internet is the easy part," wrote Goodman.
"Finding employees who have the savvy
to use the technology or … finding someone to fix your computer
can be far more challenging."

FURTHER READING:

Goodman, David. "Small Town, Big Connections: Community Networking
Gives Rural Business a Chance to Play in the Big Leagues."
Inc.
June 18, 1996.